Algorithmic Stablecoin Interpretation
Original author: BlockArk
At 4:00 pm on December 31, 2020, Mo Ke, Chief Analyst of BlockArk, conducted an "algorithmic stablecoin exchange" in the Uniswap Chinese community Interpretation" year-end sharing live broadcast, live sharing content is organized as follows:
1. What are algorithmic stablecoins
There are two types of stablecoins
Collateral Stablecoin Centralized USDT/Decentralized DAI
Algorithmic Stablecoin Based on Algorithms/Consensus , AMPL, ESD, BASIS, FRAX
When the algorithmic stable currency AMPL became popular, it was probably the DEFI wave in July this year.
After the DEFI tide passed, ESD became popular in November, and then Basis in December.
In fact, the logic of these algorithmic stable coins is similar.
Basically, it revolves around the anchored price of 1USD, and uses additional issuance, deflation, bonds, dividends and other tools to solve the problem of anchoring 1.
If AMPL is greater than 1, it will be issued to holders, if it is less than 1, all holders will deflate.
If the ESD is greater than 1, additional issuance will be made to holders and LPs, if it is less than 1, bond repurchases will be used to reduce the flow, and the next additional issuance will be issued to bondholders first.
If the Basis is greater than 1, additional issuance will be issued to the shareholders, if it is less than 1, the bond repurchase will be used to reduce the circulation, and the next additional issuance will be issued to the bondholder first.
We will analyze the in-depth logic later, first use Mith as a model (not a buying suggestion), and show you how to play algorithmic stablecoins.
Usually we say that 1 pool can use stable currency, or single currency white Prostitution pools, these pools usually generate Cash (theoretically anchored to 1U).
The 2 pools are LPs (liquidity market makers of decentralized exchanges, there is a risk of impermanent losses. Smashing), in mith we can see MIS produced by MIC-USDT, and MIS produced by MIS-USDT (I personally like to call this 3 pools).
The 2/3 pool usually has a high annualization rate. The daily rate of the mic-usdt pool reached 600% yesterday, but the risk is that if someone keeps If you smash the MIC and MIS, you will lose money. This is the famous 2-pool trap.
This is the first way to make money, 1/2/3 pool.
The second way to make money is to pledge BAS, share shares, and get dividends when inflation occurs.
This is the dividend that people who play basis talk about every day. The profit point is to use BAS to lock up the position to divide BAC, and the risk point is the sharp drop of BAS price.
The third way to make money is to buy a bond (bond) when the price of BAC (cash) is less than $1, and wait until it is greater than 1 to exchange for cash, which is equivalent to Buy cash at a discounted price. The risk is that the price of cash will not rise back 1.
Using solidus as an example here, you can see that the bond price is very cheap, but this project is almost dead, SOC (cash) The price cannot go back, and those who buy bonds will lose money.
Sorry, several projects are mixed together, because the functional stages of different projects are different, for better demonstration, but basically all such projects are three coins, cash (anchor 1), share (shares), bond (bonds).
Then we usually need to use APY tools to play this kind of mining, and this is commonly used:
Two projects have more subtle tools
After reading the APY, you will naturally know whether it is suitable for you to play, but the annualization of the 2 pools is of little significance. Only by consensus can we get on the bus.
2. The essence of algorithmic stable currency
Essence The algorithmic stablecoin is not a stablecoin, but a ZJP in this name.
But because this concept is too powerful, everyone sees that the basis is so strong, but it does not mean that the imitation disk will always be strong. Although there are many imitation disks of basis, it is recommended that you treat them with caution, or be prepared to lose money.
I said a paragraph in the article I wrote before, which is the best summary of this ZJP model.
So I really want to pour cold water on everyone and think carefully about the imitation disk.
Refer to YFI YFII and a bunch of mining afterwards,
Refer to sushi, follow sushi After a bunch of mining,
In the end, only the master disk and other very innovative projects can survive.
The Fed discussed in the group, just listen to it. You just need to figure out one question.
Who will really use AMPL, ESD and BAC as payment tools, or value storage tools?
Of course, as ZJP’s algorithmic stable currency, it also has the most potential to make money. What projects are more capable than fomo and ponzi?
3. Comparison of Algorithmic Stablecoins Competing Products
New and more common algorithmic stablecoins Now it is divided into three categories:
ESD (DSD) needs to pledge LP and single currency, and there is a time limit for unlocking, so the circulation is less and more stable. Derided as a stablecoin.
Basis (a series of imitation disks) is actually more unstable than ESD, but the expansion and contraction caused by this instability personally feel that its growth will exceed ESD, I shared this view in the middle of the month, but the basis has not been verified underwater (below 1U).
Frax (with pledge attribute) has a heavier pledge attribute. Compared with basis, it is more like making DAI/MKR a basis Class transformation, this project will be more stable than basis because of the existence of collateral. But it is a pity that there is no dividend, so there is no positive cycle, and there is no fomo in the short term. But in fact, there is a more circuitous repurchase and destruction mechanism. And because there is a private placement in front of it, not a fair launch, many people dare not enter the market.
4. Here we will explain to you why pool 2 is so dangerous
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It’s the so-called APY trap, why Nianhua will lose money tens of thousands of times. Annualized 36500%, daily 100%, hourly 4%. It seems that the annual rate is very high, but in fact, it only needs to drop 4% per hour to eat up all your profits, that is, no matter how high your profit is, the principal will not fall as fast. If the principal falls, the profit rate will be higher. The profits are not high.
Test a math problem.
There are 100BAC+100USDT in the AMM pool.
The correct answer is 0.25U. Friends who don’t know much can look up what “constant product” means.
So as long as people with this common sense yesterday calculate MITH’s MIC emissions for a day, they will not accept MIC, even if the annualized rate of MIC-USDT is very high .
ESD and Basis have already blown the wind. Basis has almost 10x income in the last 20 days. This sudden wealth effect will bring more players, So this section must continue to pay attention.
It's a pity that although I was optimistic about the basis project very early on, I didn't wait for my suitable position to enter the market and missed a big wave of profits. And because of the risk of the 2 pools, I will not push the project with you. It is more about sharing. After all, it is too difficult to determine the degree of human fomo.
Simply sort out the items in the Basis mode, these should have no major code problems (the problem is not responsible for this sentence)
https://basis.cash/ Mother During the trading session, the BAS price fell from 500 to 100 and then returned to close to 1000. I've been a bit too fomo recently. If you're a friend who just saw what I shared, I wouldn't suggest you to enter the venue, but you can keep watching. Let me add one more point, why I personally prefer basis. Because the dual currency mechanism of basis cuts the volatility, it is more suitable for listing on the exchange. For me personally, I will still wait for the underwater opportunity to enter the market, because I hate losses.
This project has a very interesting time point, that is, during the first wave of crashes, Huang Licheng bought frantically under his real name and survived the first wave of crisis. So this also proves how important the consensus is for an algorithmic stablecoin. The second wave of consensus later was to buy from the 3AC address, which gave everyone confidence.
https://basisdollar.fi / The first imitation disk, suspected to be made by the Uncle 5 team, used Value as an exchange, which caused trouble for myself to buy. New leeks still use Uniswap a lot, so I forced my own exchange to find for myself trouble.
http://solidus. cash/ The imitation disk of the Binance Chain cannot be launched.
https://mith. cash/ Huang Licheng's imitation disk has 1 billion funds being mined, and a small pool of funds can't move. If the price drops very low, you can consider buying it. After all, Huang Licheng is so rushed in other people's plate.
https://bdollar. fi/banks Binance imitation disk, more than 1 million funds locked, mini disk, no in-depth research.
https://basiscoin. finance/ It is more like the imitation disk of basis, with a pool limit of 20,000 U, to prevent big players, and the improvement point is that the boardroom (dividend pool) uses LP. Personally, I think it is not a particularly strong improvement, but the popularity is not bad. .
https://onecash. finance/ Pre-mined a lot, there is no 1 pool for others, so I skipped the first death test. It seems that MLM and the people on the plate play a little more, and the community structure is different. I personally dislike pre-mining, so I didn't participate, but this one may have a longer life than Lao Huang's. There is also a maximum adjustment factor of 1.1, so the cash will not change a lot at once.
As a supplementary note, the first death test for many projects is the smashing of these people with 0 stablecoins. This project will be cool, like solidus is the most typical. Although onecash doesn't like it personally, it at least solves the first death test.
The ESD model is basically gone, the team is said to have a new design, not so detailed. As for Frax, due to the problem of mode design, it has not yet exploded. The 3.5U recommended to everyone earlier should not be a loss. The highest is close to 8U these days. There are more projects, if I see them, I will share them with you, or you are welcome to share them with me.
https:// bihu.com/article/1450792780
You can read this article on impermanence loss, read it carefully, if you don’t understand this, you can’t play defi.
Okay, this is the end of my sharing, if you have any questions, you can ask us to communicate.
[Free question and answer session]
@楚秀红Frax: I originally wanted to lock 14 days, it turned out to be locked for 140 days. . . Lock yourself up
Mo Ke:I don’t know the opportunity for the outbreak of frax, just Like I didn't know that basis would explode so quickly. I knew that this project would still be popular 20 days ago, and I didn't know how to get up so quickly. I don't know when Frax will explode. I am personally optimistic. I will increase my position with a high probability under 4U. Also, if the locked warehouse of Frax belongs to FXS/FRAX, remember not to lock it for too long, it may be locked to zero.
@ Jesse: Thank you boss for sharing! Is it possible that the 3ac address is the project party? Is it still necessary for the project party to be a village or wild village, so that this type of project can survive the crisis at the beginning?
Mo Ke: No, someone has monitored it, it is the 3ac address. However, people at this kind of address also know that they are being monitored, so whether they are playing a bright card or a counter-routine, this needs to be analyzed in detail.
Mo Ke: No, I usually only consider the master disk to enter underwater, bet One hand, it may also return to zero, and it will be determined by the cost performance at that time.
@Walker: Excuse me , how do you see the future of algorithmic stablecoins, is it possible for capital games to replace usdt/usdc and mortgage stability?
Mo Ke: Pure algorithmic stablecoins are not optimistic. Consensus building is too difficult. So why do you want to look underwater? This is the same as BTC. The current consensus of BTC is established after countless crashes. Only by slapping the face can you brainwash others. Algorithmic stablecoins have not yet undergone large-scale underwater verification. From a personal point of view, it is more difficult. After all, no country dares to issue currency based on pure consensus. People have to have the strongest force in the world—physical transcendence, in order to maintain the consensus of currency circulation. And what does an algorithmic stablecoin rely on? Purely by consensus? I find it too difficult.
*Note: This article is only for research discussion and information sharing, not as investment advice.
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